The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) REPORT NO.: RES56321 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MARINE FISHERIES AND SOCIO-ECONOMIC DEVELOPMENT PROJECT APPROVED ON MARCH 10, 2020 TO THE REPUBLIC OF KENYA ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY EASTERN AND SOUTHERN AFRICA Regional Vice President: Victoria Kwakwa Country Director: Keith E. Hansen Regional Director: Holger A. Kray Practice Manager/Manager: Iain G. Shuker Task Team Leader(s): Ben Okindo Ayako Miranga, Ruth Tiffer- Sotomayor The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) ABBREVIATIONS AND ACRONYMS BMU Beach Management Unit CPIU County Project implementation unit CIG Common Interest Group CBO Community Based Organization GoK Government of Kenya ISR Implementation Status and Results Report NAMARET National Mariculture Resource and Training Center NPCU National Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PGM Project Grant Manual VMG Vulnerable and Marginalized Group SDFA&BE State Department of Fisheries, Aquaculture, and the Blue Economy The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P163980 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 10-Mar-2020 31-Mar-2025 Organizations Borrower Responsible Agency The Republic of Kenya Project Development Objective (PDO) Original PDO The Project Development Objective is to improve management of priority fisheries and mariculture and increase access to complementary livelihood activities in coastal communities. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-65400 10-Mar-2020 02-Jun-2020 10-Aug-2020 31-Mar-2025 100.00 24.45 70.58 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The Kenya Marine Fisheries and Socio-Economic Development Project was approved in March 2020 for an amount of Euro 89,100,000 (US$100 million equivalent), became effective in August 2020, and is scheduled to close on March 31, 2025. The project development objective is to improve management of priority fisheries and mariculture and increase access to complementary livelihood activities in coastal communities, in five coastal counties (Lamu, Tana River, Kwale, Kilifi and Mombasa). 2. The requirements of both the World Bank Policy on Investment Policy Financing and the World Bank Directive for restructuring have been met, specifically the following: (a) the Project Development Objectives remain achievable; (b) the financial audits and/or Interim Financial Reports (IFRs) are current and the Auditor has provided an unqualified opinion; and (c) the World Bank and the Borrower agreed on actions that will be undertaken by the Borrower to accelerate project implementation. B. Overall Progress 3. The ratings for progress towards achieving the PDO and Implementation Progress (IP) are Moderately Unsatisfactory (MU). The downgrade in the performance ratings was due to the slow implementation of the project which is attributed to the following reasons: (i)The project became effective in August 2020 amidst the challenges posed by the Covid-19 pandemic, which imposed restrictions on key project activities like the formation of the county project implementation units (CPIUs), the implementation of the participatory integrated community development (PICD) which was a critical approach to reaching out to communities, training and identification of the potential sub-projects to be supported among the participating communities e.t.c. For nearly two years, the World Bank task team’s engagement with the project implementing unit was through virtual meetings. (ii)The pre-election campaign period preceding the national general elections of August 2022 led to the suspension of community engagement activities which resulted in delayed appointments and the assumption of office by new authorities both at levels of government. This delay also affected the implementation of the agreed upon annual work plan. (iii)The lack of land ownership documents and unresolved land adjudication issues in the five coastal counties has delayed the approval of the county infrastructure projects. (iv)The project also encountered fiduciary challenges which included low absorption of budget, and inadequate counterpart funds, credibility of the annual workplan and long procurement processes, inefficiencies and delays in the procurement of goods, services and works. (v)Delay in the approval and gazettement of the pending fisheries management plans and their subsequent implementation. (vi)Difficulty in coordination among the different agencies in charge of fisheries and marine management, vigilance, and monitoring. The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) (vii)Reporting on the results framework, indicators and project monitoring which have led to keeping both the PDO and IP ratings Moderately Unsatisfactory in the latest ISR approved in February 2023 4. The project and especially the CPIUs have made significant progress in the implementation of Component 2 activities (community livelihood grants) which have contributed to a significant portion of the current disbursements. Furthermore, a considerable pipeline of sub-projects have been developed and currently undergoing the due diligence process as described in the Project Grant Manual, before approval and financing. 5. In line with the provisions of the financing agreement, the project's audited financial statements for FY 2020/21 and FY2021/22 have been submitted to the World Bank in a timely manner, and the auditor provided an unqualified opinion on the financial statements and the issue of budget performance. The audited project financial statements for FY2022/23 are expected to be submitted to the World Bank before December 31, 2023. The counterpart funding is provided through the funding of government officers working on the project across the NPCU and CPIUs and the co-financing of some of the project activities. During the allocation for the 2022/23 counterpart funding was reduced in the supplementary budget. The Financial Management (FM) performance rating is Moderately Satisfactory (MS). 6. The environmental and social performance rating for the project is rated Satisfactory. C. Rationale for the proposed Restructuring 7. A mid-term review (MTR) mission was undertaken for the project from May 2 - 8, 2023 which reviewed the project implementation progress since approval, highlighted the key achievements, identified the key constraints in the implementation of the project, and analyzed the reasons for the delays in project rollout. Based on the MTR findings, a project restructuring was proposed to address the following: a) Delayed Project implementation: Given the delays that the project has experienced in the last three years, there is need to restructure the project to reallocate the funds across the components and revise the result framework. More funds will be reallocated to county fishery infrastructure activities, which are critical for the fisherfolks and have been affected with price increase for the construction materials. b) Responding to the Government’s policy agenda and prioritizes. The government agenda is focused on targeting the poor in communities. The KEMFSED project is well aligned with the government’s priorities to reach the poor. The government has requested that the project increase its focus on the coastal fisheries communities, which are negatively impacted by the declining onshore fishery stock. c) Realign the project design, results indicators to accommodate unforeseen changes. During the MTR, the Bank and the Borrower discussed and agreed on different actions to accelerate project implementation and progress towards achieving the PDO. These actions are informed by the lessons learnt by both the NPCU and the CPIUs over the last three years of project implementation. The proposed actions if adopted should improve project implementation and generate greater impact in the fisheries sector and coastal communities. The proposed changes are: i. Reallocation of funds to infrastructure development. There is a need to increase the budget for infrastructure development (sub-component 1.3) to reflect the increase in the price of construction materials The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) and increase the resources for building the National Mariculture Resource and Training Centre (NAMARET), and the county fishing landing sites for which the current funding is limited. The fisheries infrastructure to be financed will contribute to improving fisheries management (landing sites and patrolling stations), which will benefit local communities and nearshore fisheries management. ii. Reallocation of funds for nearshore fisheries and co-management. While the project supports the preparation of management plans, the budget allocation for the implementation of these plans which aim to improve nearshore overfishing is insufficient. These activities will contribute to the targets of the PDO indicator 2 (Proportion of nearshore waters under improved management) and Component 1.2 indicator (BMUs achieving a minimum of 4 performance management targets). iii. Reallocation of funds for community grants. With the additional funding, it will be possible to increase the number of community grants to community interest groups (CIGs) and the vulnerable marginalized groups (VMG) for the implementation of a greater number of social, environmental subprojects, as currently only a few have been proposed. These activities will generate direct benefits to local fisheries communities in restoring degraded habitat for priority fisheries (mangroves, seaweed) which are important for food security and social benefits. It will also contribute to PDO indicator 5 (Beneficiaries in targeted coastal communities with access to complementary livelihood activities) and sub-component 2.1 indicator (Grants delivered to members of Common Interest Group (CIG). iv. Reallocation of funds for project management. The national project coordination unit (NPCU) needs to strengthen its presence in the project area and improve procurement and stakeholder engagement. Additional consultants will be hired to improve NPCU support and overall oversight. v. Changes in results framework. As a result of the project delays, weak monitoring and delay of procurement of services, the project has limited progress in the results framework, with only six out of the 14 indicators on track. The adjustment will involve changes in one PDO indicator and four intermediate level indicators. II. DESCRIPTION OF PROPOSED CHANGES 8. Based on the current situation and the rationale described above, the following are the key proposed changes to project implementation that have been agreed upon: a) Reallocation of US$ 3 million from Component 1.1 to Component 1.3. The increased funding will be used to address the price escalation of construction materials and to finance the development of NAMARET (National Mariculture Resource and Training Center) which will be expanded to include the construction of a laboratory and an administrative office. b) Reallocation of US$1 million from Component 1.1 to Component 1.2. The increased allocation will support the implementation of management and co-management of plans of Beach Management Units formed by local fishers to improve nearshore fisheries management. c) Reallocation of U$1 million from Component 2.2 to support community grants under Component 2.1. It is proposed that US$1 million will be reallocated to cover additional CIGs/VMGs/CBOs to increase social, environmental and mariculture subprojects in the coastal communities. The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) d) Reallocation of US$1 million from Component 2.2 to Component 3. It was agreed that US$1 million will be reallocated to component 3 to enhance the current staff capacities at both the NPCU and CPIUs to improve project management and support additional operational expenses like additional procurement support and county technical support. e) Reallocation of US$ 986,636 million from the Project Preparation Advance which was not exhausted to sub-component 1.3. f) Modification to the results framework. The restructuring will also involve changes in one PDO indicator and four intermediate level indicators. One intermediate level indicator will be dropped and a new one will be added. The change in PDO indicator is to reflect the current challenges of meeting seaweed production given that the construction of NAMARET is delayed, therefore the target will be reduced. The change in the intermediate level indicators is to bring clarity to the description of the indicator and reduced output. In component 1 the indicator “Policies, regulations and national plans of action (NPOAs) for fisheries and mariculture completed and submitted to Cabinet) will be reduced from 7 to 5 to address the delayed approval of these regulations. An intermediate level indicator will be dropped from Component 1 (Benchmarking tool), given the limited results achieved so far and the agreed reallocation of funds. g) Other actions. Disbursement estimates were also reviewed. Since the PDO and implementation progress ratings are Moderately Unsatisfactory, during the MTR an action plan was agreed upon (Annex 1); additional actions are included in the MTR Aide Memoire. Once this restructuring is concluded the Project Implementation Manual (PIM) and Project Grant Manual (PGM) will be revised to reflect the agreed changes. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1 - Governance Component 1 - Governance and 49.80 Revised and Management of Marine 50.80 Management of Marine Fisheries Fisheries Component 2 - Coastal Component 2 - Coastal Community Empowerment and 41.10 Revised Community Empowerment and 39.10 Livelihoods Livelihoods Component 3 - Project Component 3 - Project Management, and Monitoring 9.10 Revised Management, and Monitoring 10.10 and Evaluation and Evaluation TOTAL 100.00 100.00 The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-65400-001 | Currency: EUR iLap Category Sequence No: 1 Current Expenditure Category: GDS,WKS,NCS,CS,TR&OC Prt 1,2b&3 Pro 61,211,900.00 11,343,561.00 60,163,364.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: SUB-PROJECT GRANTS Prt 2a Project 25,928,100.00 0.00 27,950,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: REFUND OF PREPARATION ADVANCE 1,960,000.00 986,635.13 986,636.00 Total 89,100,000.00 12,330,196.13 89,100,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2019 0.00 0.00 2020 2,674,000.00 0.00 2021 16,053,000.00 0.00 2022 25,362,000.00 0.00 2023 27,238,000.00 24,450,000.00 2024 22,089,000.00 43,589,829.00 2025 6,584,000.00 31,960,171.00 . The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) . Results framework COUNTRY: Kenya Marine Fisheries and Socio-Economic Development Project Project Development Objectives(s) The Project Development Objective is to improve management of priority fisheries and mariculture and increase access to complementary livelihood activities in coastal communities. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Improve management of priority fisheries Fisheries management plans implemented (CRI, Number) 0.00 2.00 Proportion of nearshore waters under improved management 0.00 45.00 (Percentage) Improve management of mariculture (Action: This Objective has been Revised) Annual production in mariculture by small-scale producers 37.00 150.00 supported by the project (Metric ton) Rationale: Rationale for revision: Currently, the production of mariculture products (seaweed and non-seaweed) is connected to the construction of NAMARET which has been delayed. The project is already supporting mariculture production through Action: This indicator has been Revised community grants under Component 2. Also, some interventions might be supported for non-seaweed production with BMUS under Component 1.2. The indicator is reduced to address the current delays. The indicator is revised to report the investments connected to community grants for mariculture production. Seaweed (Metric ton) 30.00 100.00 The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Rationale: Rationale for revision: Currently the production of mariculture products (seaweed and non-seaweed) is connected to the construction of NAMARET which has been delayed. The project is already supporting mariculture production through Action: This indicator has been Revised community grants under Component 2. Also, some interventions will be supported for non-seaweed production with BMUS under Component 1.2. The indicator is reduced to address the current delays. The indicator is revised to report he investments connected to community grants for mariculture production. Non-seaweed (Metric ton) 7.00 50.00 Rationale: Rationale for revision: Currently the production of mariculture products (seaweed and non-seaweed) is connected to the construction of NAMARET which has been delayed. The project is already supporting mariculture production through Action: This indicator has been Revised community grants under Component 2. Also some interventions might be supported for non-seaweed production with BMUS under Component 1.2. The indicator is reduced to address the current delays. The indicator is revised to report he investments connected to community grants for mariculture production. Strengthen access to complementary livelihood activities in coastal communities Beneficiaries in targeted coastal communities with access to 0.00 217,000.00 complementary livelihood activities (Number) Beneficiaries in targeted coastal communities with access to 0.00 108,500.00 cmplementary livelihood activities/women (Number) Share of target beneficiaries with rating ‘Satisfied’ or above on 0.00 65.00 project interventions (Percentage) Share of target beneficiaries with rating ‘Satisfied’ or above 0.00 65.00 on project interventions/women (Percentage) PDO Table SPACE The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Component 1: Governance and Management of Marine Fisheries Policies, regulations and national plans of action (NPOAs) for fisheries and mariculture completed and submitted to Cabinet 0.00 5.00 (Number) Rationale: Rationale: The gazettement of policies, fisheries regulations and management plans have been slow and with limited progress. The process is slow due to long consultation process and the capacity and resources to implement these policies, Action: This indicator has been Revised regulations and plans. The new government has agreed to reduce the number of policies, regulations and plans from seven to five, and focus on the ones that be delivered with the remaining project period. The project will drop the following: (i) the Blue offset policy; (ii) NPOA for IUU and the iii) KMFRI operationalize regulations. Score on Fishery Information and Monitoring System (Number) 0.00 3.00 BMUs achieving a minimum of 4 performance targets (Number) 0.00 42.00 Rationale: Rationale: The changes will be on the description of the cumulative target. Below is the new revision. The indicator measures the number of BMUs, out of approx. 84 along the KE coast, achieving at least 4 annual performance targets: 1) at least 6 out of 12 monthly meetings of BMU Executive Committee are conducted and minutes submitted to, and available at, county fisheries department; 2) at least 2 BMU members’ assembly meetings conducted and minutes Action: This indicator has been Revised submitted to, and available at, county fisheries department; 3) BMU has an annually updated register of fishers and vessels, with at least 75% of fishers having licenses; 4) members of BMU monitoring, control and surveillance (MCS) sub- committee participate in at least one patrol, in at least 6 out of 12 months; 5) at least 40% of annual required budget is received in revenue for the previous calendar year; and 6) BMU has collected and submitted at least 50% of the target number of catch records for catch monitoring in at least 10 out of 12 months. Cumulative targets. Operational surveillance activities in Kenyan marine fisheries 0.00 20.00 (Number) The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Rationale: Rationale. This indicator will be revised in its description, air patrols will be dropped because these are expensive and Action: This indicator has been Revised difficult to undertake by the government. The project will include the observer program as a new surveillance activity. Score on Marine Spatial Planning (Number) 0.00 9.00 Priority fisheries for which Bench Marking Tool (BMT) exercise 0.00 6.00 has been undertaken (Number) Rationale: Rationale: this indicator is marked for deletion. After 3 years the project have not been able to generate verifiable scores Action: This indicator has been Marked for Deletion for previous years, neither plans that can put into practice to improve fisheries management. The government agrees to drop the indicator. Beneficiaries in targeted fisheries communities have access to 0.00 5.00 fishing landing sites infrastructure (Number) (Number) Rationale: Rationale. The project will provide significant funding to improve and build new fishing landing sites in the five coastal Action: This indicator is New counties of Kenya. Currently there is not indicator related to these interventions. Component 2: Coastal Community Empowerment and Livelihoods Grants delivered to members of Common Interest Group (CIG) 0.00 22,000.00 (Number) Grants delivered to members of Common Interest Group 0.00 11,000.00 (CIG)/women (Number) Improvement in basic social infrastructure to benefit coastal 0.00 75.00 households (Number) Action: This indicator has been Revised Rationale: The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Rationale. The number of social infrastructure sub-projects will be revised from 160 to 75. This is because the number of proposals received from the communities was less than anticipated and there are challenges of having the required land documentation for the selected sub-projects in the coastal counties, this will reduce the feasibility of more social subprojects. Beneficiaries with access to livelihood-related training and/or 0.00 90,000.00 technical assistance supported by the project (Number) Beneficiaries with access to livelihood-related training and/or technical assistance supported by the project/women 0.00 22,000.00 (Number) IO Table SPACE The World Bank Marine Fisheries and Socio-Economic Development Project (P163980) Annex 1. AGREED ACTION PLAN TO ACCELERATE IMPLEMENTATION OF P163980-KEMFSED No. Action Responsibility Timeline 1 Restructure the Project to reallocate the funds across the NPCU/WB June 30, 2023 components and revise the results framework 2 Review and enhance the capacity of the NPCU and CPIUs to improve and expedite implementation of project activities: a. Redeploy or recruit one additional procurement NPCU August 31, 2023 specialist to expedite the procurement of activities in the pipeline and contract management b. Redeploy or recruit two clerks of works to NPCU September 29, 2023 support supervision of the county infrastructure activities c. Hire two additional Technical Assistants (TAs) to NPCU/CPIUs August 31, 2023 support each of the county project implementation units (CPIUs) in the monitoring of component 2 activities, to handhold CIGs in monitoring and procurement 3 Regular engagement between the Bank and the State Department of Blue Economy and Fisheries (SDBE&F) to review project implementation progress a. Monthly meetings with the Principal Secretary NPCU/WB Continuous to review project implementation progress b. Bi-monthly meeting with NPCU and the CPIUs NPCU/WB Continuous to review project progress and challenges 4 Enhance oversight and coordination with participating NPCU Continuous counties and other beneficiary agencies 5 Initiate the procurement for all planned activities and NPCU Immediate complete the ongoing actions in timely manner 6 Regularly monitor contract implementation to ensure NPCU/CPIUs Continuous they executed within budget and in timely manner 7 Acquire the relevant land documentation for the NPCU July 30, 2023 proposed county fisheries infrastructure, to allow commencement of procurement process 8 Prepare and an agreed in a workplan for each agency NPCU. July 30, 2023 responsible to support the patrolling and MCS strategy